Financial Crisis: Government Response and Impact Analysis

This assignment analyzes the global financial crisis, focusing on the government's response and its impact on the economy. It examines the stimulus packages, the role of banks, and the importance of financial stability. The assignment highlights the government's role in supporting the banking system through measures such as financial aid and deposit insurance, and suggests that investments in infrastructure and other sectors are crucial to boost the economy. It also discusses the role of long-term bonds and asset acquisition in stabilizing the financial system. The paper includes references to relevant literature and news articles to support the analysis.

BUSINESS
MANAGEMENT

Global financial crisis
There was large scale stimulus plan introduced by the government to safeguard the country
from the harmful effect of the economic crisis. It is the duty of the government to bail out the
banks as the banks are the main source that spreads funds and keep the wheels of the
economy flowing. The proposal of the government to allocate an amount for education,
housing, infrastructure and small business is a great initiative that will help in making great
improvements (O’Neill, 2011). The support of the banking sector was vital to safeguard the
establishment of the financial system. In tune to this, the government incurred various
financial cost and credit risk that needs to be borne by the tax payers. The measure comprises
of government guarantee for lending interbank, financial institution recapitalization in a
difficult time, the increment of the coverage of deposit insurance and schemes related to
relief schemes (Mishkin & Eakins, 2009).
In order to provide a boost to the banking system, it is imperative that the government must
stress on various areas like energy, infrastructure, investment, etc. It is important that the
entire economy must function provide a boost to the banking system. The initiative of the
government must be in areas like infrastructure where further developments should be made
so that more investments fetch in and this ultimately drives money into the economy thereby
banks get a huge boost (Viney, 2009). Infrastructure is one of the mechanisms that boost the
overall monetary framework. Investment schemes that provide returns must be framed with
minimum lock in period will enable the government to draw in money and hence, the banks
will get a boost in terms of funds. This can be redirected to the economy in terms of funds.
The government can raise long term bonds that will influence the government borrowing and
bring money into the economy thereby the banks will have more power to provide funds. The
asset acquisition can be done through the future sale of the assets and this happens to provide
stability to the banking system (Klein, 2011). Therefore, the government plays a leading role
in encouraging the banking system and keeping the financial system intact.
2

Global financial crisis
References
Klein, N 2011, Looting with the lights on, viewed 1 August 2017, www.guardian.co.uk.
Mishkin, F.S and Eakins, S.G 2009, Financial markets and institutions, Australia
O’Neill, B 2011, Class antagonisms or mollycoddled youth?, viewed 1 August 2017,
www.theaustralian.com.au.
Viney, C 2009, McGrath’s Financial Institutions, Instruments and Markets, 6th ed, Sydney
3